The convenience of having a credit card has it’s advantages. For example, it’s much safer to use a credit card than to carry around wads of cash, especially if you’re traveling. Have a you tried renting a hotel room, a car or making airline reservations without a credit card lately? Can you say … No way!
But when people use credit cards as a crutch or substitute for cash is when trouble starts to mount. According to research by the Federal Reserve, Americans risk damaging their financial stability most because of credit mistakes. America has quickly grown into a nation hanging on – by the fingertips of their credit cards.
Americans spend the largest percentages of their total income paying high interest credit card debt and other personal loans. For example, pay-day loans and rent-to-own type payments. High interest loans continue to push more and more Americans into bankruptcy, while quietly making these companies richer.
Bad credit card management has also helped to fuel the present mortgage meltdown the nation is experiencing now. I’ve often said, “show me a mortgage default or foreclosure and I’ll show you bad credit card management not far behind, they follow each other.” Many financial experts predict credit cards could turn into the next meltdown, similar to the mortgage meltdown. To counter this possibility, or speed it up depending on how you look at it, many Credit Card companies race to increase fees.
Many now rush to raise late fees, minimum monthly payments and most now apply what they call “Universal Default.” This practice allows credit card companies to increase your interest rate if you make a late payment on another credit card account. Many Credit Card companies also apply it if you pay your mortgage, phone or utility bill late now. (Did you know Credit Card companies check your credit report each month to see if you’re paying all your bills on time?)
It’s estimated over half of the banks in the U.S (and growing) use universal default. Many consumers have experienced interest rate increases as high as 30 to 40 percent because of this universal default clause.
Here Are The Top 5 Credit Card Mistakes To Avoid.
Note: The more of these mistakes you can avoid the better your credit card management will improve.
1. Not Shopping Around for the Best Deal Mistake.
Even with shaky or bad credit, many African American consumers have the false assumption the first company that offers them credit is the best they can do – without shopping around.
With today’s highly competitive climate it’s surprising what deals (rates, terms, fees) you could find by simply shopping around. So, compare at least three companies.
2. Not Understanding Credit Card Billing Terminology Mistake.
If you don’t understand the language, Credit Card companies have the advantage over you from the start. It’s like walking in the dark with a flashlight in your hand and not knowing how to use it.
At a minimum you must know 15 terms all Credit Card companies use and by law must inform you about in each billing statement. For a list of those 15 terms and what they mean Click Here!
3. Not Reading or Understanding the Fine Print Mistake.
This is a continuation of step 2 above. If you don’t know the terminology you’ll find it frustrating, confusing and even a waste of time to spend much time reading the fine print.
This plays conveniently into the hands of Credit Card companies bulging profits. As a result, they can slip fees, charges and rates on you without you paying much attention.
This is an example of how what you don’t know can hurt you.
What has failing to see or understand what people in the credit industry call “Gotcha Clauses” done?
It has quickly caused more financial hardships on consumers, especially African Americans, than any other mistake. For simple tricks to help make it easier to read fine print Click Here
4. Using Your Credit Card Like an ATM Mistake.
If credit card rates aren’t high enough, using your credit card for cash advances can quickly wreck havoc on your monthly budget.
Of course Credit Card companies make it oh-so convenient by making sure you have a healthy supply of those “convenience checks” right? What they conveniently do is suck you dry with insane interest, that would make a loan shark blush.
5. Making the Minimum Payment Mistake.
This is perhaps a credit card companies favorite. Most know when they have you making the minimum payment their profits soar. Plus they know they’ll have a long-term income stream coming in.
When a Credit Card company calculates the minimum payment on your balance two results happen. The minimum payment can drop your balance slightly. Similar to dropping the level of a swimming pool using a teaspoon.
But thanks to the power of compounding, you’ll always pay and pay for a long time – with large doses of interest to boot. And if you ever miss a payment? Well, I don’t want to think about it. Gorilla sized late fees are tacked on to add to the problem.
If you ever find yourself caught in the minimum payment trap (I’ve been there, done that) do everything you can to make more than the minimum payment.
The quicker you can get out of the minimum payment trap the better you’ll be financially and the better you’ll feel emotionally. Trust me.
If you’ll follow these suggestions, you’ll find yourself using credit cards more intelligently – instead of the credit cards … and Card Companies using you.
As Credit Card companies begin to tighten the reins and up their fees, you now have more knowledge to protect yourself.
You may not be in a position to do all the suggestions now. But get started, take baby steps. The key is consistency . With determination and commitment you can break free and stay free of these credit card traps.